When It Comes to Picking an Inventory Finance Company, the Choices and Variables Are Daunting. What Are the Keys and How Do You Compare and Choose Between asset-based Inventory Financing Companies? What if You Need Startup Inventory Purchase Order Financing?
Let Us Look at Key Factors to Consider When Choosing the Best Inventory Financing Company:
Your Industry:
If you sell fruits and vegetables, PACA rules come into play and there are only a few lenders comfortable with the farmer’s inherent lien rights associated with fruits and vegetables. If you sell construction materials, you need a lender comfortable with local construction lien rights and pay when paid contract clauses. Healthcare products are used by consumers but paid for by insurance companies and Medicare and Medicaid. Your specific industry will narrow your funding source choices to those lenders who understand and see the highest value and subsequently make loans based on your type of inventory.
Your Inventory’s Makeup:
Are you a Wholesaler and do you purchase finished goods for resale from China or Mexico and constantly or seasonally have Inventory in Transit? Are you a manufacturer of raw material from several vendors and you typically have high quantities of Work In Process? Can your inventory be readily sold through many distribution channels? Or is it specific to only one customer? Again, pick an inventory finance company who is comfortable with your inventory’s type, physical state, and the wholesalers receivable that are created.
Your End Customer Type:
Do you sell to Wal-Mart and other creditworthy big-box retailers garment, shoes and apparel from your inventory? Are you a dealer selling building materials to local contractors? Are your sales mostly overseas? Again, your customer type and makeup will make a difference to an inventory finance company. The type and quality of your receivable financing will also come into play.
Your Dollar Needs:
Many Inventory Finance Companies have minimum volumes in the millions of dollars. If you have sales of less than one million per year, you have limited choices. WIP Funding’s typical client has sales of $50,000-$10,000,000 per month.
Your Time in Business & Creditworthiness:
A few lenders will fund startups under the right circumstances. Many are more bank-like in their requirements and want you to be at least 3 years in business. Again, some lenders will help startups and those losing money. Many lenders want to see profits and cash flow. Know your own situation so you don’t waste time with the wrong lender.
The Source of Your Inventory:
As mentioned above, does your Chinese supplier require a Letter of Credit or Cash Against Documents to ship your goods? Or maybe your vendors give you terms but you need Floor Plan Financing before you can ship goods to your customers. Is this for a seasonal inventory line that lets you carry additional inventory a few times per year?
Your Gross Margins:
If you sell raw materials like oil and basic chemicals, margins are slim compared to the 30% gross margins associated with consumer products. High volume and low margin type companies will have a different choice in lenders versus those selling to the government or retailers at higher margins.
The right Inventory Finance Company can have a Positive Impact on Your Business. WIP Funding has the deep industry, logistics, and manufacturing experience to meet your businesses needs.